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Market Power: Microsoft

COMPETITIVE POLICY MONITORING

There are many reasons that prevail which make it necessary for the monitoring of the competitive market. Elaborated below are a few important reasons to introduce policies towards competition rules.

Preventing market concentration

There could be undesirable market concentration levels that arise from the sale of public assets to prospective investors. Doing so will enable the investors to gain an upper hand purchasing a winning asset. The state is bound by certain commitments to its people due to which it is conflicting between selling the assets at the highest available price and yet retaining the competitiveness in the market. Hence policies are made regarding the exchange of assets and consequently suppressing they market concentration.

Protection of domestic market

With trade competition rules, countries can maintain their reign on their markets by regulating the inflow of outsiders. Through competition policies, preference and benefit is given within the domestic market.

Global trade

Since the trade conducted in the global market spans the entire world, it would be increasingly difficult to bring fair assessment of all the happenings unless it were governed with regulations that the competition policies imposes upon the market places.

Government barriers

By participating in the competitive rulings, a firm makes itself available to incentives that the government puts forward. Following the government prescribed action brings about anticompetitive practices that encourage domestics markets.

COMPETITIVE ENVIORNMENT

The competitive environment is described as the internal and external being of the company that influences the working of the company. The competitive environment could pertain to the market forces that affect the company and also the internal dynamics of the company that can alter its momentum.

Microsoft is battling on quiet a few fronts that face it today. In the internal direction, Microsoft has running into legal troubles with its accounting and anti-trust actions. On the other hand, Microsoft faces competition like Apple for operating software, Sony for its Playstation models, Google for its search engine technology, Netscape for its internet browser and many more companies that compete with the entities that Microsoft holds under its umbrella.

MICROSOFT AS A MARKET POWER

Microsoft has enjoyed tremendous market power in respect to its competition. It has managed to create an almost monopoly in the market by exercising the market power so much so that, the judge ruled against Microsoft in the anti-trust law suits it faced. The federal government bans companies from maintaining monopoly of a product through illegal methods as opposed to direct selling of the product or service in the market.

FACTORS INFLUENCING MARKET POWER

There are several natural factors that can decrease market power as described below:

Seasonal fluctuation - The seasonal fluctuation that is bought upon markets by demand reduces market power for a company. Natural causes like hurricanes, floods, drought, etc. also are factors that affect market power.

New entrants - New entrants or competition will reduce market power as there is more concentration in the market segment than there was earlier.

Currency fluctuations - Changes in currency and denominations can affect market power. If the value of a currency drops, the market power will automatically drop.

Price war and lack of demand - When in competition the lack of demand for a product or service will naturally decrease its market power in its environment. When there is a price war and the prices have to be forcibly dropped to a point that it amounts to losses the there could be not enough can be reinvested to sustain market power.

Lack of Innovation - Not diversifying can be troublesome for a company in a market that has not too long duration of product life cycles. Being technically unsound and not having innovation in products and services can be a disaster for the market power of the company.

Accounting Scams - Internal reporting and accounting scams naturally reduce the market power of a company. For examples the power of Enron, Arthur Anderson, WorldCom, etc. after its accounting scandals were exposed when in former times, these companies were the leaders of their market segment.

COMPETITIVE POLICY AND ITS IMPACT

Each trading bloc is governed by competitive policies that curb the exploitation of the small fish in the market by the big guns. The World Trade Organization is mainly responsible for laying the framework under which the competitive policies have evolved. International trade is governed by trade agreements and organizations like North American Free Trade Association (NAFTA), the European Union (EU), South Asian Association for Regional Cooperation (SAARC), Association of Commonwealth Countries, Association of South East Asian Nations (ASEAN) etc. These are certain uniform policies that are placed across all the governing bodies.

Anti-Dumping policies - When goods are sold at a value less than the fair value for reasons like outdating and price war, anti-dumping policies protect a nation. In cases like this the respective governments are allowed to impose duties on the products of foreign origin. To market these products, care has to be taken to ensure that the price is accurate and the products are introduced as a fair market player

Anti-Trust policies - When Microsoft breached its conduct and was proven guilty in the case of anti-trust issues, it bought to light the problems other companies like Netscape experienced when in competition with Microsoft. In situations like these the product and its competitors should be closely analyzed for any misconduct and be made sure that all products receive a fair chance at success.

Trade Barriers - Trade barriers in the form of tariffs, taxes, etc. are introduced to protect the domestic industries and the exported product must be marketed as an additional product in the market besides local competition for it to survive in a just manner.

Accounting standards - The international accounting standards state that you cannot beyond an extent misrepresent losses as foreign losses. That is the case with the Microsoft cookie jar accounting and the Enron accounting scandals. International accounting standards must be maintained across the world.

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CONCLUSION

We thus see that while Microsoft is overcoming the setbacks it faced due to the anti-trust law suit and the cookie jar accounting, there are factors in place to ensure that market power does not corrupt the competitive environment of companies in the market.